Correlation Between Bayer AG and Grifols SA
Can any of the company-specific risk be diversified away by investing in both Bayer AG and Grifols SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bayer AG and Grifols SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayer AG and Grifols SA ADR, you can compare the effects of market volatilities on Bayer AG and Grifols SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bayer AG with a short position of Grifols SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and Grifols SA.
Diversification Opportunities for Bayer AG and Grifols SA
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bayer and Grifols is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG and Grifols SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grifols SA ADR and Bayer AG is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bayer AG are associated (or correlated) with Grifols SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grifols SA ADR has no effect on the direction of Bayer AG i.e., Bayer AG and Grifols SA go up and down completely randomly.
Pair Corralation between Bayer AG and Grifols SA
Assuming the 90 days horizon Bayer AG is expected to under-perform the Grifols SA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bayer AG is 1.67 times less risky than Grifols SA. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Grifols SA ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 805.00 in Grifols SA ADR on August 27, 2024 and sell it today you would earn a total of 65.00 from holding Grifols SA ADR or generate 8.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Bayer AG vs. Grifols SA ADR
Performance |
| Timeline |
| Bayer AG |
| Grifols SA ADR |
Bayer AG and Grifols SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer AG and Grifols SA
The main advantage of trading using opposite Bayer AG and Grifols SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, Grifols SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Grifols SA will offset losses from the drop in Grifols SA's long position.The idea behind Bayer AG and Grifols SA ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Grifols SA vs. Novartis AG ADR | Grifols SA vs. AstraZeneca PLC ADR | Grifols SA vs. GlaxoSmithKline PLC ADR | Grifols SA vs. Roche Holding Ltd |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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